Pound Posts Monthly Advance Versus Dollar on Home Loans Gain

By Lukanyo Mnyanda -
Apr 30, 2013

The pound posted its biggest
monthly gain versus the dollar since October 2011 as a report
showed British banks granted more loans for homes in March than
analysts predicted, adding to signs the economy is improving.

Sterling fell versus the euro, extending its third monthly
drop this year, after a report showed U.K. consumer confidence
unexpectedly declined in April. Futures traders decreased their
bets that the pound will weaken against the dollar, figures from
the Washington-based Commodity Futures Trading Commission showed
last week. U.K. government bonds fell as the Debt Management
Office sold 50-year inflation-linked gilts at a record-low
yield.

“If you look at speculative positions, accounts are still
fairly short the pound,” said Kasper Kirkegaard, a senior
currency strategist at Danske Bank A/S (DANSKE) in Copenhagen, referring
to a bet that the price of an asset will fall. “That’s been
gradually scaled back and we can see potential for it to go even
higher in the short term.”

The pound gained 0.3 percent to $1.5545 at 4:53 p.m. London
time after climbing to $1.5546 yesterday, the most since Feb.
15. The U.K. currency gained 2.3 percent this month, the most
since rising 3.2 percent in October 2011. Sterling slid 0.2
percent to 84.70 pence per euro. It lost 0.4 percent against the
common currency in April.

Britain’s currency may weaken to $1.43 and 88 pence per
euro in six months’ time, Danske Bank’s Kirkegaard said. The
median predictions in Bloomberg surveys of economists and
strategists is for sterling to end the year at $1.49 and 85
pence per euro.

Mortgage Approvals

U.K. lenders granted 53,504 mortgages last month, compared
with a revised 51,947 in February, the Bank of England said.
Economists had forecast an increase to 52,700 from an initially
reported 51,653, based on the median estimate in a Bloomberg
News survey.

The difference in the number of wagers by hedge funds and
other large speculators on a decline in the pound compared with
those on a gain, so-called net shorts, was 60,112 on April 23,
compared with 61,975 a week earlier, the CFTC said on April 26.

The pound has gained 1.3 percent in the past month, the
third-best performer after the New Zealand dollar and the euro
according to Bloomberg Correlation-Weighted Indexes, which track
10 developed-nation currencies. Sterling is still down 3.1
percent this year.

A report last week showed Britain’s economy avoided a
recession in the first quarter, damping speculation the Bank of
England will boost stimulus measures, or quantitative easing.

‘Sharp Recession’

Britain has experienced an “extremely sharp recession and
pretty anaemic recovery” Bank of England policy maker David
Miles was quoted as saying in the Belfast Telegraph. Miles has
voted to increase the 375 billion-pound target for asset
purchases every month since November.

The Bank of England’s Monetary Policy Committee next meets
on May 8-9.

The 10-year gilt yield rose four basis points to 1.69
percent. The 1.75 percent securities due September 2022 fell
0.3, or 3 pounds per 1,000-pound face amount, to 100.5.

The U.K. sold 500 million pounds of index-linked gilts due
in March 2062 at a so-called mini tender at a real yield of
minus 0.213 percent, the lowest ever for a 50-year inflation-
protected bond, and down from a rate of 0.04 percent at a
previous sale via banks on May 29.

U.K. gilts returned 1.3 percent this month through
yesterday, extending this year’s gain to 1.9 percent, according
to indexes compiled by Bloomberg and the European Federation of
Financial Analysts Societies. German bonds rose 1.1 percent in
2013 and U.S. Treasuries earned 0.9 percent.